While the outlook for mainstream industrial and logistics space is clouded by geopolitical uncertainties and rising competition from neighbouring countries, one subsector continues to shine: the cold store — or cold chain — industry.

Cold-store facilities refer to purpose-built premises that provide temperature-controlled storage. Cold-chain logistics typically spans several temperature ranges, including deep-freeze (–25°C to –30°C), chill (2°C to 8°C) and controlled ambient (15°C to 20°C). These cater to a wide spectrum of products, from meat and dairy to pharmaceuticals.

Ultra-cold storage, such as –70°C, is required for highly specialised products like vaccines and laboratory samples. As food storage is almost always involved, cold-store facilities are commonly located within designated food zones in industrial estates — areas zoned specifically for food manufacturing, processing and related activities. One such example is Mandai Estate, a designated food zone that incorporates central kitchens, food factories and high-tech farming facilities.

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A niche but resilient subsector

We believe this subsector will remain a niche feature of our logistics market. There are several reasons for that. One is the high operating costs of maintaining an F&B business. Coupled with glacial growth in F&B sales, entrepreneurs now, more than ever, need to find greater cost efficiencies.

One way to achieve this is by centralising back-of-house operations into central kitchens, while relocating perishable inventory to specialised cold-store facilities. As both uses are typically located within food zones, they complement each other operationally.

Central kitchens are usually housed within food factories, while large-scale temperature-controlled storage is provided by dedicated cold-store facilities. Many food factories are not fitted with sizeable temperature-controlled areas that necessitate the use of external cold storage for perishable inventory.

The urgency to adopt more efficient operating models has increased this year, as F&B sales growth in Singapore has been lacklustre (see Chart 1).

At the same time, Singapore’s growing population continues to support rising food demand. Even if F&B establishments do not see a proportional increase in revenues, supermarkets and grocers will still require greater volumes of cold storage to meet consumption needs (see Chart 2).

Limited supply despite strong performance

If the cold-store submarket is performing well, why is there so little new supply in the pipeline?

The reasons are multi-fold. They include restrictions on suitable locations, limited availability of large plots required for scale, high capital expenditure (capex) and the need to secure long-term tenant commitments to underwrite that capex. Collectively, these constraints have kept new supply in check.

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While the pipeline of food factory developments in Singapore is sizeable, only two cold-store developments are expected to be completed over the next three years. Chart 3 illustrates the identified supply pipeline of both food factories and cold-store facilities.

The two major upcoming cold-store projects are a development spanning 511,000 sq ft gross floor area (GFA), by Commonwealth-Kajima Development, expected to be completed in 2026, and a 345,000 sq ft GFA facility by ESR-Logos REIT, estimated for completion in 2027.

Strong utilisation and pricing dynamics

While official statistics on cold- store occupancy are unavailable, our market soundings suggest utilisation rates average around 90%, with some facilities operating at full capacity.

Although industrial real estate is typically measured in square feet, cold-chain operators think in terms of pallets — the number of pallets a facility can store. Rental benchmarks are usually anchored to prevailing food factory rents, with additional premiums applied for temperature control and specialised services. Food factory rents vary by location (see Chart 4).

Who uses cold-store facilities?

QSR, F&B and retail operators: Quick-service restaurant (QSR), F&B and retail users require both storage and logistics support, such as delivery services. Given the limited shelf life of their products, inventory turnover is high. Cold-store operators generally prefer such clients, as higher churn translates into greater demand for value-added services like delivery, picking and packaging.

Food manufacturers and central kitchens: These users may serve either domestic or export markets. For export-oriented operations, cold-store services are typically required for inbound raw materials, while outbound processed products often only need ambient storage. As such, goods are usually delivered to and retrieved from cold storage in full pallets.

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Limited competitive threat from Malaysia: The competitive threat from Malaysia is relatively contained due to restrictions on the importation of uncooked meat and poultry products from Peninsular Malaysia. As a result, competition is largely limited to frozen seafood and certain dairy products.

Outlook

While the broader industrial and logistics market is expected to remain weighed down by external headwinds, the cold-store submarket is likely to continue performing well over the next two to three years. Although new supply is coming on stream, much of it has already been underwritten by operators who conducted detailed demand studies prior to committing capital.

For aspiring investors, one key consideration is the specialised nature of cold-store facilities. These developments require heavy upfront investment in electrical, mechanical and refrigeration systems. As such, it is preferable to secure anchor tenants — often operators — before finalising design and construction.

Examples of such anchor operators include third-party logistics provider in cold chain supply management, Commonwealth Kokubo; integrated logistics provider CWT; supply chain company YCH Group; and Storbest, a third-party logistics supplier specialising in end-to-end cold supply chain management. Often, these providers prefer to customise layouts and equipment to suit their operational workflows and customer profiles.